Dear boss: if you want to reward your employees, give them a raise — not a bonus

Instead of recognizing increased output with a permanent pay bump, employers have turned to an ephemeral reward: bonuses.


February 14, 2018

In recent years, the economy has seen a steady rise in productivity gains, but wage growth has largely stagnated.

One (albeit small) contributor to this: employers are increasingly giving their employees bonuses instead of raises.

I raise you one bonus

According a report by the HR consulting firm Aon Hewitt, businesses have felt a pressure to stay nimble in the wake of the Great Recession, and they’ve dealt with it by avoiding fixed costs, like raises.

Case in point: 25 years ago, only 3.1% of companies’ compensation budgets were devoted to bonuses; by 2017, that figure quadrupled to 12.7%. In the same time span, raises diminished from 5% to 2.9% of total compensation budgets.

Why does this suck?

Employers have placed a premium on maximizing productivity while minimizing costs — often at the expense of employee satisfaction.

Instead of recognizing increased output with a permanent pay bump, they’ve turned to an ephemeral rewards system: bonuses, gifts, one-time perks — things that don’t have a lasting impact on revamping wage growth.

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